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Japan pledges to support eurozone

21 june 2011, 14:41
Japan's Finance Minister Yoshihiko Noda. ©Reuters
Japan's Finance Minister Yoshihiko Noda. ©Reuters
Japan will continue to support Europe in its battle to contain a debt crisis, finance minister Yoshihiko Noda said Tuesday, as eurozone officials try to avoid a potentially damaging Greek default, AFP reports.

Japan has previously pledged to help boost confidence in the bonds issued by the European Financial Stability Facility (EFSF), amid concerns earlier this year for eurozone nations such as Portugal and Ireland.

But market fears are now centred on Greece, which received a multi-billion-dollar bailout last year but is struggling to meet a deadline to pay a loan installment and avoid a sovereign default.

"Japan has been making its own contributions to bring stability to European financial conditions, such as by buying debt (issued by the rescue fund) during efforts to support Portugal," Noda said at a news conference following a cabinet meeting Tuesday.

"We'd like to continue those efforts," he said.

The world's second-largest holder of foreign currency after China, Japan bought about two billion euros ($2.9 billion) of bonds in programmes launched to date by the eurozone-backed EFSF in January and in mid-June.

Japan's efforts to assist Europe may be driven by concerns that the continent's sovereign debt turmoil poses a threat to European demand for Japanese goods or send the yen higher against the euro, say analysts.

Greece was on Monday given a two-week deadline to drive through drastic new cuts before it can receive a 12-billion-euro payment to ensure it does not default.

Regarding assistance for Greece, Noda said: "We will cooperate if there is something that Japan can do."

The International Monetary Fund, which is funding a third of Greece's first 110-billion-euro bailout, warned decisive action was needed to prevent the crisis from spreading throughout the 17-nation eurozone and beyond.

Markets worry a default on Greek debt could trigger a cascade of problems in Europe's bigger economies, including Spain. Such a domino effect could again hobble the global financial system, much like the massive crisis of 2008.

Showing the extent of international fears over renewed financial contagion, G7 finance ministers from Britain, Canada, France, Germany, Italy, Japan and the United States held a late Sunday-night telephone conference to discuss the Greek debt crisis.

Prime Minister George Papandreou's government faces a confidence vote on Tuesday as it looks to eventually steer 28.4 billion euros of austerity cuts into legislation in order to get its latest lifeline.

European Union leaders also stage a summit in Brussels on Thursday and Friday -- with a second bailout for Greece, whose debts currently top 350 billion euros, near the top of a packed agenda.

Noda, meanwhile, said the Japanese government should continue efforts to persuade ruling-coalition lawmakers to accept a plan to double the nation's five percent consumption tax over five years to improve its finances and rein in a huge debt.

The government on Monday was forced to delay announcing plans for tax and social security reform due to objections to the planned hike, as Prime Minister Naoto Kan faces pressure to resign.

Japan's debt is the industrialised world's biggest at around 200 percent of GDP after years of pump-priming measures by governments trying in vain to arrest the economy's long decline.

Organisations such as credit-rating agencies and the International Monetary Fund are scrutinising Japan's efforts to prevent its fiscal problems from hurting its debt holders or the global economy.

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